Tim Fowlkes OSD Compensation 17 Nov 09

1. Tim Fowlkes OSD Compensation 17 Nov 09 Compensating The Force

2. Strategic Goals of Compensation • Recruit – Overall, critical skills, high quality • Retain – Overall, critical skills, high quality • Motivate/Reward Effective Work – Productivity & performance • Distribute/Align/Assign – Right people, with right skills, when and where needed (including hard-to-fill jobs) • Transition/Separate – Right people, right skills, right time

3. Where is DoD’s Money… Construction Family Housing Military Research Personnel 37% Civilian Personnel Procurement Operations & Maintenance

4. Where is DoD’s MilPers Money… Special & Incentive (<5%) Housing Food Basic Pay Other Retirement Accrual (Includes Medical)

5. ACTUAL COMBAT Away, Arduous, Danger Pay Philosophy DANGER INCREASES TERRORISM CZTE BENEFITS SERVING IN COMBAT ZONE (CZ) OR QUALIFIED HAZARDOUS DUTY AREA (QHDA) SERVING IN DESIGNATED IMMINENT DANGER AREA; HOSTILE FIRE SERVING IN HARDSHIP DUTY LOCATION DEPLOYED OR TDY HOME BASE TRAINING Benefits Increase Closer to the Fight

6. E-6/0-3, married with children, serving in combat zone, with member’s counterpart serving in CONUS (while Iraq shown here, same numbers apply for members assigned in Afghanistan): Compensation of Troops: Iraq vs. CONUS

7. Basic Pay Family separation Overseas HousingAllowance Medical Benefits Education Benefits Temporary Lodging Other Special Pays Survivor’s Benefits Clothing Aviation Pays Hazardous Duty Pays Thrift Savings Plan Compensation Regular Military Compensation (RMC) Basic Allowance For Housing Other Allowances Basic Allowance For Subsistence Submarine/Naval Pays Federal Income Tax Advantage Dislocation Travel & Transportation Health Professions Pays Enlistment/Retention Bonuses Assignment Incentive Pay Overseas & CONUS COLA Retired Pay Evacuation Hardship Duty Pays Responsibility Pays Death Benefits Commissary & Exchange MWR Special & Incentive Pays & Bonuses Other Benefits

8. Special & Incentive (S&I) Pays • The military compensation system employs upwards of 65 statutory special and incentive pays, among them, more than 30 bonuses • S&I pays are used to keep military compensation flexible, competitive and efficient and… • Overcome specific manning problems by attracting and retaining individuals with critical skills • Encourage retention in career fields; and assignments involving arduous, hard-to-fill or unusual conditions • Incentive pays also encourage volunteers for arduous or dangerous assignments • Bonuses are used to attract and retain critical skills • Enlistment, reenlistment, skill conversion, transfer to other Service • Market driven

9. Hardship Duty Pay (HDP) • OSD designates hardship duty for HDP • By law, up to $1500/month payable in HDP for designated hardship duty • In application: • HDP-Mission (M): sole mission designated for HDP-M is recovery of remains of US service members lost in past wars; $150/month paid • HDP-Location (L): paid to recognize members in areas where Quality of Life is substantially below that of members generally in U.S. • By policy, max paid is $150/month • In IDP areas, max HDP-L paid is $100 (personal security issues covered by IDP) • Currently, locations in about 160 countries designated for HDP-L • HDP-Tempo (T): Inordinate personal tempo could be designated as “hardship duty” for HDP purposes as an alternative to paying “High Deployment Allowance” under 37 USC 436

10. Imminent Danger Pay (IDP) • Paid in designated imminent danger areas; statute requires determination that members are subject to “threat of physical harm or imminent danger on basis of civil war, civil insurrection, terrorism or wartime conditions” • $225 paid for any month (or portion of a month) in which duty performed in designated area • Currently, locations in over 45 countries and 7 sea areas are designated for IDP

11. Assignment Incentive Pay (AIP) • Origin: market based tool to incentivize members to volunteer for hard-to-fill assignments and less desirable locations • Intended to mitigate negative retention consequence of involuntary or “slam” assignments • With OSD approval, Service Secretaries may designate assignments and authorize a monthly AIP amount to serve in the designated assignments • Statutory maximum payable monthly: $3,000

12. Family Separation Allowance (FSA) • Purpose is to partially reimburse members who have dependents, for added expenses when separated from their dependents • Paid to members who have dependents, and who as a result of military orders are separated from those dependents for over 30 continuous days • Amount payable: $250 monthly

13. Compensating Wounded Warriors • Traumatic – Servicemembers Group Life Insurance (TSGLI) • Pay and Allowance Continuation (PAC) • Prohibition of payment for meals in a military hospital by members undergoing medical recuperation or therapy • Travel for families of hospitalized members • Expansion of authority to remit or cancel indebtedness of members of the Armed Forces incurred on Active Duty Several compensation measures serve to assist wounded members through their recovery, rehabilitation, and/or transition to veteran status.

14. Primary Post-Service Pay and Benefits • Separation Pays • Disability Severance – For disabilities rated less than 30%. 2 months pay per year served, with a minimum of 6 years for combat disability and minimum of 3 years for all others • Involuntary Separation (non-disability severance) – 10% of annual pay per year served • Retired Pays • Disability retirement if unfit for duty – For disabilities rated 30% or greater: Pay at disability % or 2.5% x years served • Length of Service Retirement: Must have at least 20 years of active service. Pay at 2.5% x Years Served x Pay Base (Final or (post 1980 entry) High-36 month average) • Reserve Retirement: Must have at least 20 years of combined active and reserve service. Pay at age 60 similar to Length of Service Retirement using constructed years of active service

15. Thrift Savings Program • Contribution Limits: $16,500 annually • $5,500 Age 50 • $49,000 annually (Combat Zone) • 2011 – Roth TSP Option • 2 years to implement • Contribution limits will remain • Web Site Renovation • Nov 09 – Beta Version • Mar 10 – Full Rollout

16. Savings Deposit Program • Members deployed to designated areas overseas can deposit up to $10,000 • Withdrawals for emergencies only • Account balances are usually paid out within 90 days after the member leaves the eligible region. • Deposits do not receive preferential tax treatment; interest is taxable when the member receives his/her account balance. • Interest Rate: 10 percent

17. FSSA vs. SNAP • DoD • Family Subsistence Supplemental Allowance (FSSA) • USDA • Supplemental Nutrition Assistance Program (SNAP)

18. FSSA - Background • Started 1 May 2001 • Supplemental food allowance to raise the income of eligible members to eliminate eligibility for food stamps • Members on active duty • Entitled to BAS • With dependents • Income eligibility • Eligibility is based on USDA criteria for food stamp eligibility, except income for FSSA purposes will include the value of government quarters • Voluntary program • FSSA monthly entitlement can not exceed $1100

19. FSSA - Issues • Members may qualify for SNAP or FSSA • Use of food stamps by members is undesirable • DoD cannot track members receiving food stamps • SNAP does not count government housing as income; FSSA does • SNAP – Debit/Credit Card; FSSA - Cash

20. FSSA – Recent Fixes • Member denied FSSA, applies for SNAP, brings back SNAP qualification to receive same amount of FSSA • BAH added to the LES for members living in government housing • Increase visibility of FSSA Program

21. FSSA Way Ahead • Make FSSA criteria identical to SNAP criteria? • 2010 NDAA: Increase in maximum monthly amount of FSSA from $500 to $1100

22. Military Compensation(In Context) • Housing • Zero out-of-pocket for average member • Tailored to (variable) home size @ full local price for housing / utilities • Retirement • E-7 who retires at 20 gets $1.8 million over a lifetime • Lump-sum equivalent at age 38 would be $505,000 • Health Insurance • Civilian pays about $2,700 a year • 97% have additional co-pays / co-insurance averaging $1,200 annually • Non-Pay Benefits • Commissary shopping saves 30% for typical grocery purchases • Child Care -- only 14% of private industry offers child care support Source: 10th QRMC